Assuming you're dealing with rental property, since the water heater costs you less than $2,500, you are allowed to expense it and be done with it. Appliances are deprecated over 5 years. So for a $700 water heater, depreciating $125 a year will barely make a dent in your tax liability. A whole dollar each year if you're lucky maybe. Just expense it and be done with it. The IRS says you can do this under De-minimus Safe Harbor.

I have only one rental property and the water heater had to be replaced in June 2019 because of a problem, do I qualify under Safe Harbor to expense this as the cost is under $2500 or do I need to depreciate over 27.5 years? This is for tax year 2019 that I am filing in 2020.

Do I qualify for the De Minimis Safe Harbor to expense my under $2100 water heater for my rental property? This is the only rental property I have and not sure if I qualify under Safe Harbor.

Probably.  The De Minimis Safe Harbor Election is an option you can take each year that lets you write off items $2,500 or less as expenses instead of assets

Here are the rules you need to meet to take this election:

• You don't have an applicable financial statement (most people don't).
• You have a consistent process for how you record expenses and assets.
• You record these items as expenses on your books/records.
• The cost of each item as shown on your receipt is $2,500 or less.

@coby123

Irene, appreciate you answering my question. I meet the criteria that you listed.

Thank You.